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Fourth International, February 1946


Review of the Month

Washington’s Loan to Britain


From Fourth International, February 1946, Vol.7 No.2, pp.37-38.
Transcribed, edited & formatted by Ted Crawford & David Walters in 2008 for ETOL.


On December 6, 1945,after three months of haggling, recriminations, threats and counter-threats, the representatives of Wall Street granted to Great Britain a loan of 4.4 billion dollars, at 2 per cent payable in 50 years. The loan is not a lump sum but a line of credit which may be drawn upon for a period of 5 years and used for strictly specified purposes. Attached to the loan is a set of “trade” agreements. Both houses of Parliament have accepted the loan and passed these agreements. Congress is still to be heard from.

The loan and all the provisions connected with it have aroused a storm of protest in London. The English diplomats began negotiations confidently expecting not only the cancellation of “lend-lease” obligations but a grant or gift of up to six billion dollars. They were sadly disillusioned. Instead they had rammed down their throats a loan, almost one-fifth of which (approximately three-quarters of a billion) constitutes settlement for “lend-lease” balances.

Hugh Dalton, Chancellor of the Exchequer, lamented the “shortcomings” of the loan terms. A Tory member of Parliament declared it to be “our economic Munich.” Lord Woolton, in the House of Lords, bewailed the surrender of “our just rights to the power of the dollar.” The English Economist, the most authoritative economic publication of Britain, branded it “a bitter pill.” The English Tribune, organ of the “left” Laborites, excoriated it as a “savage bargain.” An explanation for this universal outcry is not at all hard to find.

First, let us look at the terms of the loan itself. To believe the Wall Street spokesmen, they are very generous. This “generosity” lies in computing the interest rate over a period of 55 years. The rate thus turns out to be 1.62 per cent, or a lower rate than the one paid by the US Treasury for some of its own funds. However, what is omitted in this demonstration of imperialist generosity, are the funding and carrying charges. When these are added, we get an altogether different picture.

By the terms of the loan, the annual installments for half a century will amount to approximately 140 million dollars, or, as the English Tribune points out, “a tribute almost double the total exports which went from here to the United States every year before 1939.”

It is hardly likely that English exports to this country will average a sum as huge as these annual payments over any lengthy period. On the other hand, American exports to England have averaged double and even triple that sum. The question naturally arises, how will England, today a debtor country pay for these imports, let alone for the US loan? The answer, of course, is she can’t and won’t pay. She will plunge deeper and deeper into debt, becoming as servilely dependent on Wall Street as did England’s own debtors in relation to herself, in the past.

US Treasury books still carry a loan on which England defaulted after World War I. This loan is virtually the same amount as the current one. England, when she was still a creditor country proved incapable of carrying a load that is now being imposed. Can she perhaps carry it now? Wall Street knows better. This loan has been imposed precisely in order to transform England into an insolvent debtor. As a matter of fact, the loan agreement carries ingenious provisions for precisely this eventuality. Who is more completely at the creditor’s mercy than an insolvent debtor?


Harsh as the terms of the loan itself are, the accompanying “agreements” are even more onerous. In return for Yankee dollars, England has been compelled to formally abdicate from her century-old dominant financial position. She was obliged to become signatory to the Bretton Woods agreement. Thereby the English pound sterling is henceforth pegged to Wall Street’s dollar.

Within one year’s time the “sterling bloc” must be dissolved, thereby loosening beyond repair the ties of Britain’s empire.

This twofold stroke at the same time shatters England’s dream of constituting a “western bloc” as a counterweight to the overwhelming preponderance of the trans-Atlantic colossus.

An equally grave breach in Britain’s empire is effected by still another provision which binds England to break down her “Empire preference system” of trade. Again, within one year she must “remove all restrictions” on US imports to the homeland, dominions, colonies, mandated areas, etc.

To make assurance doubly sure it is further incumbent upon England to unfreeze, scale down or cancel her huge debt to her own colonies and to Latin American countries. While on the surface this may appear to be a measure alleviating England’s plight, in reality it only aggravates it. The more successful she is in “scaling down” or “canceling” her sterling debt, all the harder will it be for her to enter into long-term trade agreements with her cheated creditors, all the easier will it be for Wall Street to squeeze her out of the traditional markets, especially Egypt, India and Latin America.

After the First World War France found herself in a relationship vis-à-vis England which Leon Trotsky characterized as being that of “England’s last dominion.” Today England finds herself in a similar position vis-à-vis the United States.

Far from ameliorating the relationships between the two “democracies” the loan and the agreements can act only to aggravate them. This is openly recognized by the capitalist press both here and in Great Britain.

The hostile reaction of Britain to the Anglo-American is no passing mood of the moment. It may, in fact no doubt will, become less acutely vocal ... But this new and heavy strain on relations between the United States and Britain will not lift just because there is less talk about it in the papers and in Parliament (New York Times, December 16, 1945).

Furthermore, threats are already being voiced that the agreements will be repudiated. One London paper stated:

Everything points to Britain being ultimately compelled to repudiate commitments whose fulfillment United States trade policy will make impossible. (Idem.)

It is incontestable that the English imperialists, with their age-long traditions and habits of world rule, will not docilely surrender to Wall Street. But at the present time, they are utterly powerless to do anything except retreat step by step under the pressure of their all-powerful American rival. All the levers are today in Wall Street’s hands: overwhelming preponderance in the financial, industrial, diplomatic, military, and other fields.

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